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Hartford and Discover to Repay TARP Money

By Dealbook March 16, 2010 7:12 pmMarch 16, 2010 7:12 pm

7:41 p.m. | Updated Two more big companies — the Hartford Financial Services Group and Discover Financial Services — are preparing to pay back the billions of dollars that they received from the government’s banking bailout.

Hartford said late Tuesday that it would repay $3.4 billion from the Troubled Asset Relief Program. And Discover said it would repay $1.2 billion in TARP money.

Hartford said it would sell nearly $2.4 billion in stock and debt to pay for buying back its preferred shares that had been issued to the Treasury Department during the bailout. The insurance company’s securities offerings will consist of $1.45 billion of common stock, $500 million of convertible preferred stock and $425 million in senior notes.

“The Hartford always viewed this investment as temporary capital and intended to return it as soon as it was prudent,” said Liam E. McGee, Hartford’s chairman and chief executive, in a statement.

Hartford will also offer $675 million in senior notes to roll over existing debt maturing this year and in 2011.

The company said it planned to repurchase the preferred shares from the Treasury once it had received approval to do so.

Following the repayment, the Treasury will still own warrants to buy approximately 52 million shares of Hartford’s common stock at an initial exercise price of $9.79 a share. Hartford’s shares ended trading at $27.26 on Tuesday. The company said it did not intend to repurchase the warrants.

Discover, meanwhile, said it had already received regulatory approval to buy back $1.2 billion of its preferred shares. It said it would issue $350 million in subordinated debt during the second quarter before redeeming the preferred stock.

“All along, we suggested that when we saw the clouds part and we saw a clear path forward, that’s when you would expect for us to execute this exit,” Discover’s chief financial officer, Roy A. Guthrie, said during a conference call with analysts on Tuesday afternoon, according to Bloomberg News. “Looking forward, we feel a lot better about things.”

Discover announced the TARP repayment as it reported a net loss of $104 million for the first quarter, compared with net income of $120 million in the quarter a year earlier. The latest results included a pretax addition of $305 million to its loan loss reserves.